Bonus incentive for an agent:
When it comes to real estate commissions, a bonus incentive can work wonders if done properly.
Market with a bonus:
During a slow (buyer’s) market, your listing agent may suggest that you increase the financial incentive in order to attract more selling agents.
The added incentive should be offered strictly to motivate the buyers’ agents. If your agent takes part of the increased commission, this portion will do nothing to help entice the other agents.
Avoid making the buyers suspicious:
Bonuses are highlighted on the listing sheet, a copy of which is given to the buyers. The bonus could read: “$1,000 Bonus to Selling Agent.” This could easily make the buyers wonder if their agent is pushing them to buy that home because of the bonus inducement.
Avoid this buyer perception, instead of offering a bonus, have the commission increased. It is coded on the listing sheet so that only agents notice it. The commission is not considered a bonus so that disclosure to the buyer is not required.
A time sensitive bonus can hurt or help a seller:
A common blunder a listing agents does is add remarks to the listing sheet, such as, “$2,000 selling bonus to the buyers’ agent if sold before June 30.”
It’s highly likely that the sellers need to sell by this date. Usually it’s because they currently have a contingency on a house to purchase.
If interested buyers see the proposed bonus, this gives a date that they can plan on to make an offer - putting the sellers at a negotiating disadvantage.
A bonus incentive can also give the perception that a deadline is attached to it.
If the June 30 date above really doesn’t mean anything, this tactic could be used to create agent and buyer interest. It suggests a motivated seller. It's intended effect is to increase showings, subsequent offers, and hopefully a contract.
The initial offer(s) may be lower than normal. However, you will not be negotiating from a position of desperation since nothing will happen if this date passes and a contract is not achieved.
Replace commission percentage with actual dollars:
Offer a dollar amount instead of a percentage amount. Thus on a $250,000 house, a payout of 3% could instead be shown as 7,500, which will catch the agent’s attention.
Increasing the payout to $8,000 will stand out. And it only represents a $500 increase. Remember though, a specified dollar amount remains the same no matter what the house sells for. If you drop your asking price, consider the need to ajust the dollar amount down by amending the listing agreement.
If price becomes an obvious problem during the negotiations, you might appeal to the agents to have the commission lowered in order to “make the deal work.”
Incidently, offering a $6,000 commission in the example above provides some savings over 3%. A dollar amount will still be perceived as impressive - and especially when selling high-end homes. A $20,000 payout on a $900,000 home isn’t 3% but it’s an impressive figure.
A bonus for the buyers:
A bonus is intended to generate a faster sale by offering a larger financial incentive to agents. But think about making your pitch directly to the buyers.
Offering first time buyers a cash rebate can work, to a point. Many lenders will not permit an excessive rebate. After the contract is agreed upon and you offered the buyers a sizeable financial amount, have them run this by their lender to be sure they are OK with it. Otherwise find out what amount would be agreeable to the lender and if there is an excess amount that is unacceptable, offer to take this amount off the final contract price.
Lender acceptance is more common when concessions are used to pay the buyers’ closing costs.
A better bonus for the buyers:
If just selling (as opposed to maximizing profit) is your priority, consider this approach.
Determine the absolute lowest offer you’d accept. Let’s say you’re asking $275,000 and the absolute lowest you’ll go is $250,000.
Next, calculate what the commission would be on that figure. Let’s say your commission is 5%, which is $12,500 of $250,000. Subtract this amount from the lowest price you’d take ($250,000 less $12,500 = $237,500). In a depressed market, offer this very attractive, bottom line figure as a by-owner.
This approach beats the socks off the competition. In a bad market, buyers are really looking for the best deal. Let prospective buyers know how you came up with this great price. This could sell your home.
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